BTIG Upgrades Apple (AAPL) to Buy
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Rating Summary:
52 Buy, 12 Hold, 1 Sell
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Today's Overall Ratings:
Up: 11 | Down: 35 | New: 23
Rating Summary:
52 Buy, 12 Hold, 1 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 11 | Down: 35 | New: 23
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(Updated - March 14, 2013 8:33 AM EDT)
BTIG is going against the grain and upgrading Apple (NASDAQ: AAPL) from Neutral to Buy with a price target of $540 Thursday, citing many revenue opportunities which they believe can return the company to EPS growth in 2014.
"We believe the stock is reflecting low buy-side investor expectations, even if the sell-side has not yet caught up with their estimate revisions," analyst Walter Piecyk said. Apple will also benefit from a reversal of the impacts of the tighter phone upgrade policies in the United States, its most important market, and is likely to come to a decision on its cash by the end of the month."
Notably, BTIG downgraded Apple's stock to Neutral last April when the stock was 32.4 percent higher, or $633.68 per share.
The upgrade comes despite the firm seeing an earnings miss for the upcoming March quarter and a pretty disappointing June guidance. In fact, the firm cut numbers today, and their March and June EPS estimates are now 8% and 19% below consensus, respectively.
The upgrade is based in part on the firm's belief that Apple will deliver a lower-priced iPhone by the end of the year. "We believe a product that addresses the more than 70% of global wireless subscribers that are unsubsidized pre-paid is necessary in order for Apple to grow its EPS next year," the analyst said. This is not "rocket science", they said, and the company can deliver while still staying true its mantra of only making great products.
A low-priced iPhone could contribute $11 billion to Fiscal 2014 revenue, the firm estimates. This implies 37.5 million phones sold at an ASP of $300 in Fiscal 2014.
In addition to a lower priced iPhone, a bigger screen phone would also be nice they said. "We don't pretend to understand what consumers want and have leaned heavily towards Steve Job's belief that "consumers don't know what they want until you show it to them"," the analyst comments. " But it's undeniable that there is demand at the high-end (where all the profits are made) for a larger screen. A more material move in the size of the iPhone would generate a better upgrade cycle compared to the marginal change in size of the iPhone 5."
The firm cut June quarter revenues to $35 billion and $7.80 of EPS on an expectation of 27.5 million phones sold compared to a consensus view north of $40 billion in revenue and $9.59 in EPS.
For 2014, BTIG is including $5 billion in revenue for a "unspecified new product," which will add $1.40 to 2014 EPS. The firm notes this splits the bull-bear view. Bears would think it ludicrous to assume the company can easily add $5 billion and revenue, while bulls would call that amount an overly conservative rounding error.
On the use of cash, BTIG would like to see the company use the cash to invest for growth and they would embrace a large acquisition that leverages its large installed base of iOS users. Even using some cash for a deal, the firm said with an estimated $144 billion in cash at the end of the March quarter there is plenty of room to increase the divined or share repurchase. "Rather than just issuing a special dividend or increasing dividends size, the CFO needs to layout a dividend/share repurchase policy going forward in order to give investors greater clarity on how that dividend can grow over time," the analyst said.
For an analyst ratings summary and ratings history on Apple click here. For more ratings news on Apple click here.
Shares of Apple closed at $428.35 yesterday, with a 52 week range of $419.00-$705.07.
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BTIG is going against the grain and upgrading Apple (NASDAQ: AAPL) from Neutral to Buy with a price target of $540 Thursday, citing many revenue opportunities which they believe can return the company to EPS growth in 2014.
"We believe the stock is reflecting low buy-side investor expectations, even if the sell-side has not yet caught up with their estimate revisions," analyst Walter Piecyk said. Apple will also benefit from a reversal of the impacts of the tighter phone upgrade policies in the United States, its most important market, and is likely to come to a decision on its cash by the end of the month."
Notably, BTIG downgraded Apple's stock to Neutral last April when the stock was 32.4 percent higher, or $633.68 per share.
The upgrade comes despite the firm seeing an earnings miss for the upcoming March quarter and a pretty disappointing June guidance. In fact, the firm cut numbers today, and their March and June EPS estimates are now 8% and 19% below consensus, respectively.
The upgrade is based in part on the firm's belief that Apple will deliver a lower-priced iPhone by the end of the year. "We believe a product that addresses the more than 70% of global wireless subscribers that are unsubsidized pre-paid is necessary in order for Apple to grow its EPS next year," the analyst said. This is not "rocket science", they said, and the company can deliver while still staying true its mantra of only making great products.
A low-priced iPhone could contribute $11 billion to Fiscal 2014 revenue, the firm estimates. This implies 37.5 million phones sold at an ASP of $300 in Fiscal 2014.
In addition to a lower priced iPhone, a bigger screen phone would also be nice they said. "We don't pretend to understand what consumers want and have leaned heavily towards Steve Job's belief that "consumers don't know what they want until you show it to them"," the analyst comments. " But it's undeniable that there is demand at the high-end (where all the profits are made) for a larger screen. A more material move in the size of the iPhone would generate a better upgrade cycle compared to the marginal change in size of the iPhone 5."
The firm cut June quarter revenues to $35 billion and $7.80 of EPS on an expectation of 27.5 million phones sold compared to a consensus view north of $40 billion in revenue and $9.59 in EPS.
For 2014, BTIG is including $5 billion in revenue for a "unspecified new product," which will add $1.40 to 2014 EPS. The firm notes this splits the bull-bear view. Bears would think it ludicrous to assume the company can easily add $5 billion and revenue, while bulls would call that amount an overly conservative rounding error.
On the use of cash, BTIG would like to see the company use the cash to invest for growth and they would embrace a large acquisition that leverages its large installed base of iOS users. Even using some cash for a deal, the firm said with an estimated $144 billion in cash at the end of the March quarter there is plenty of room to increase the divined or share repurchase. "Rather than just issuing a special dividend or increasing dividends size, the CFO needs to layout a dividend/share repurchase policy going forward in order to give investors greater clarity on how that dividend can grow over time," the analyst said.
For an analyst ratings summary and ratings history on Apple click here. For more ratings news on Apple click here.
Shares of Apple closed at $428.35 yesterday, with a 52 week range of $419.00-$705.07.
Join StreetInsider.com FREE and get immediately alerted when news breaks on your stocks and other market items - JOIN NOW
*NEW - Download StreetInsider's FREE iPhone and iPad App - Click Here
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